Feature Article 844

Covering the World Tower by Tower

Our Spotlight Stock, American Tower (AMT)—as Ian Wyatt and Stephen Mauzy of Personal Wealth Advisor said, is one of basically two companies leading the cell tower industry. Right now, that marketplace is worth around $10.4 billion, just in the U.S., and has grown at an annual rate of 8.7% since 2016.

The global telecom towers market was valued at 4,342.520 thousand units in 2020, and it is estimated to reach 5,308.088 thousand units by 2026. And there is big money in the tower market, as you can see by the investment returns to AMT, depicted in the graph below.

American Tower - Intl New Tower Build ROI

(1) For illustrative purposes only. Does not reflect any American Tower financial data. (2) Calculated as Gross Margin divided by Construction/Upgrade Costs. Source: American Tower Company Presentation

The advent of 5G technology is one of the major catalysts behind that rise. As you can see by the graph below—while 4G continues to rapidly grow—the next four years will see major expansion of 5G also.

American Tower - The Evolution Towards 5G

Notes: (1) 1G devices shown as part of 2G curve for simplicity (2) T-Mobile and Verizon have not shut down 2G yet, AT&T shut down in Jan’17 Sources: Altman Solon Research & Analysis, GSMA Intelligence, DoCoMo, 3GPP. Source: American Tower Company Presentation

The rapid adoption of cell phones worldwide is also stoking 5G growth. While the U.S. remains extremely competitive in mobile, according to Reportlinker.com, a 2020 Communications Monitoring Report noted that Canadian mobile wireless service is also exploding, with revenue “reaching CAD 28 billion in 2019, representing over 55.5% of all telecommunications service revenues.”

And as you can see in the graph below, AMT is participating in both the U.S., Canada, and across the world. Last December, the company completed its acquisition of InSite Wireless Group LLC for nearly $3.5 billion. American Tower expects this purchase to generate $150 million in property revenue and some $115 million in gross margin this year.

American Tower - 4G Mobile Data Usage

Notes: IoT: based on M2M module connections, traffic and data usage; Non-IoT includes everything other than M2M modules (e.g. smartphones, tablets, laptops, and feature phones) Sources: Ericsson Mobility Report November 2020, Altman Solon Research & Analysis. Source: American Tower Company Presentation

In its latest quarter, AMT saw total revenue increase 20.2% to $2,299 million, and net income was up 66.8% to $748 million. And analysts are continuing to increase their future earnings projections.

We are just at the tip of the 5G revolution, and AMT is going to continue be one of the leaders. The stock isn’t cheap, but I think it’s going to continue its upward trend as 5G adoption gears up.


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